Ferragamo CEO sees improved growth outlook in H2, upbeat on China

MILAN (Reuters) - Italian luxury leather goods maker Salvatore Ferragamo expects group results to improve in the second half of 2014 from the first six months on the back of strong demand in China and in global travel retail, its chief executive said on Sunday.

A shopper carries her purchases from the Salvatore Ferragamo boutique on Rodeo Drive, ahead of the Christmas festive season in Beverly Hills December 9, 2013. REUTERS/Fred Prouser

Ferragamo, whose shoes were loved by Hollywood film stars such as Marilyn Monroe and Audrey Hepburn, plans to add between 10 and 20 shops to its current network this year, four of them in new large Chinese cities, Michele Norsa said.

Ferragamo, which derives some three quarters of its revenues from shoes and bags, has a strong presence at key airports all over the world, making travelers an important customer group.

“We expect an improvement in the second part of the year,” Norsa said at the group men fashion show in Milan, which featured casual smart attires dominated by shorts and shadows of brown.

“For China the medium-term outlook is extremely positive and growth in the travel retail market is still very rapid.”

The group increased its annual sales at stores it operates directly in China by 10 percent in the first quarter, though geopolitical tensions between China, Japan and Vietnam had an adverse impact on its wider business in Asia, said Norsa.

Norsa, who worked for rival Valentino before joining Ferragamo in 2006, declined to give more specific forecasts on how the business would progress in the second half of 2014.

Ferragamo posted an overall increase of 3 percent in retail like-for-like sales in the first quarter. The Tuscan group, still controlled by the founding family, went public in 2011 and is the biggest fashion company listed on the Milan bourse.

Chairman Ferruccio Ferragamo told reporters on Sunday the group was not considering any merger or acquisition, despite analysts’ expectations for continued consolidation in the sector and changes in the ownership structure of Italian fashion firms.

“We don’t plan any extraordinary operations,” he said.

EURO STRENGTH

Norsa said Ferragamo, which manufactures its shoes and bags entirely in Italy, may marginally raise prices on selective items in Europe to offset the strength of the euro against the U.S. dollar and the yen and against volatile emerging markets currencies such as the Turkish lira and the Russian rouble.

The euro has risen from around 1.31 against the U.S. dollar a year ago to nearly 1.38.

“The foreign exchange level has a big impact and is affecting growth,” said Norsa.

“If the foreign exchange rate does not come back to more reasonable balance, we may consider some small increases to reduce the price gap in some places,” Norsa said.

Geopolitical tensions between Russia and Ukraine are still affecting business in Europe as wealthy clients from those two nations have cut down on foreign travel, he said.

“(The crisis) is impacting some specific stores, like Capri and Montecarlo,” said Norsa.

“But the Russians are still very much in love with the brand. In Moscow we just re-opened a much larger store. They will come back, now they are probably traveling less.”